Final Review

Question 1

materials to be purchased is

Answer 1

(units to produce × materials required for each unit) + desired ending materials inventory - beginning materials inventory

Question 2

A merchandising company’s budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $…

Answer 2

60000
(400,000×5%)+10,000+
+30,000

Question 3

LA Company has a beginning cash balance of $6,000, cash receipts of $12,000, cash payments of $7,200 and an outstanding loan balance of $1,500. Their preliminary cash balance is $

Answer 3

10800
6,000+12,000−7,200

Question 4

A merchandising company’s budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Depreciation on store equipment: $25,000; Rent on administrative building: $30,000; Miscellaneous administrative expenses: $5,000. The total general and administrative expenses on the January general and administrative expense budget will be $…

Answer 4

61250
1,250+25,000+30,000
+5,000

Question 5

A company has the following loan activity—Additional loan from bank: $19,000; Ending cash balance: $5,600. The preliminary cash balance is:

Answer 5

(13400)
Reason: $5,600 - $19,000 = ($13,400)

Question 6

A company’s sales budget indicates the following sales: January: 25,000; February: 30,000; March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month’s sales. Units to be produced in January will be …

Answer 6

26500
((30,000×45%)−12,000)
+25,000

Question 7

A manufacturing company’s sales budget indicates the following sales: January: $30,000; February: $20,000; March: $15,000. The company expects 80% of the sales to be on credit. Credit sales are collected 30% in the month of the sale and 70% in the month following the sale. The total cash receipts collected during March will be $

Answer 7

17800 WHY

Question 8

A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase and the remaining amount in the following month. Cash payments for June for direct materials is $

Answer 8

82500
(90,000−(90,000×25%))
+(60,000×25%)

Question 9

A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be $

Answer 9

10668
((118,800−48,500)
−(1,500+250+41,880))
×40%

Question 10

benefits of budgeting.

Answer 10

Focuses on future opportunities.

Motivates employees.

Assists in the control function.

Question 11

A company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month. If Product X sells for $10 each, the total sales for the first quarter of the year will be $

Answer 11

13240
4,840+4,400+4,000
Multiply the 10% and sdf to months sales

Question 12

budgeted direct labor cost for a service firm is:

Answer 12

budgeted direct labor hours × direct labor cost per hour

Question 13

A merchandising company’s budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $

Answer 13

Purchases budget

Question 14

A company expects to sell 500 units during the second quarter and 550 units in the third quarter. Currently, during the second quarter, they have 46 units in beginning inventory. If they desire ending inventory of 10% of the next quarter’s sales,
…. units will need to be produced in the second quarter.

Answer 14

509
(500+(550×10%))−46

Question 15

A manufacturing company’s sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. The company expects 70% of the sales to be on credit and the remainder to be cash sales. Credit sales are collected in the month following the sale. The total cash collected during March will be $..

Answer 15

31500
(35,000−(35,000×70%))
+(30,000×70%)

Question 16

A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the budgeted net income will be $

Answer 16

16002
((118,800−48,500)
−(1,500+250+41,880))
−(((118,800−48,500)
−(1,500+250+41,880))
×40%)

Question 17

A merchandising company’s sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. Sales personnel are paid a salary plus commission. Salaries are expected to be $5,000 per month and the commission is 10% of sales. Additionally, advertising is expected to be $600 per month. The total selling expenses for the quarter will be $

Answer 17

25800
(600+5,000+(25,000
×10%))+(600+5,000
+(30,000×10%))+(600
+5,000+(35,000×10%))

Question 18

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct labor variance.

Answer 18

24400 U
Reason: $374,400 - (35,000 units x 1 hr x $10/hr) = $24,400 U